Earlier this week, the Bitcoin (BTC) price suddenly plummeted by around 9 percent. The decline was part of a sideways price movement that began in early March. Traders are starting to wonder if this is the start of a larger correction or if the price is simply consolidating before reaching a new all-time high. Most people are convinced that the coming months will prove that we are in a bull market, but there are also less positive signs.
The Bitcoin futures market is a cause for concern
The price reached a new record high of almost $73,700 about three weeks ago. The price then fell by almost 20 percent, but now the price is mostly moving sideways. This suggests that traders are not yet sure where exactly the price will go – it is literally a standoff between buyers and sellers.
For more clarity, we can take a look at the futures market. Data from CryptoQuant shows that the Funding rate of Bitcoin futures contracts are near an all-time high. It was only at the beginning of 2021 that the value was higher than it is now, and that was shortly before a deep crash.
This means dealers who lung (bullish) are most prominent in the market and that they are willing to engage traders who do so short (bearish) should pay for it. In this rising market, there is greater risk in taking short positions because with futures you run the risk of margin calls (read: liquidations).
Most traders are therefore extremely positive. You would think this would be positive for the market – lots of buyers means a lot of demand and therefore the price can rise. But that doesn’t always have to be the case. The level of the funding rate is actually a cause for concern, because since it has rarely been this high, it could also mean that it will soon fall again.
Bitcoin market in conflict
So it could suppress traders’ confidence in the bull market. Investors’ doubts are reflected not only in the sideways price, but also in the news. For example, the number of Bitcoins on exchanges fell to a new low last week. So fewer Bitcoins have to be bought.
At the same time, Bitcoin miners have been selling their BTC en masse. Their stocks have not been as low as they are now since the summer of 2021. This is important because miners are usually considered very smart traders, so this news is less positive.
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